Disaster Capitalism: The new economy of catastrophe, Naomi Klein
Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. —Milton Friedman
Three years ago, when I was in Baghdad on assignment for this magazine, I paid an early-morning visit to Khadamiya, a mostly Shiite area. An Iraqi colleague had heard that part of the neighborhood had flooded the night before, as it did regularly. When we arrived, the streets were drenched in slick green-blue liquid that was bubbling up from sewage pipes beneath exhausted asphalt. A family invited us to see what the frequent floods had done to their once lovely home. The walls were moldy and cracked, and every item—books, photos, sofas—was caked in the algae-like scum. Out back, a walled garden was a fetid swamp, with a child’s swing dangling forlornly from a dead palm tree. “It was a beautiful garden,” Durdham Yassin, the owner, told us. “I grew tomatoes.”
For the frequent flooding, Yassin spread the blame around. There was Saddam, who spent oil money on weapons instead of infrastructure during the Iran-Iraq War. There was the first Gulf War, when U.S. missiles struck a nearby electricity plant, knocking out power to the sewage-treatmen
Around the corner, a truck was idling with a large hose down a manhole. “The most powerful vacuum loader in the world,” it advertised, in English, on its side. Yassin explained that the neighbors had pooled their money to pay the company to suck away the latest batch of sludge, a costly and temporary solution. The mosque had helped, too. As we drove away, I noticed that there were similar private vacuum trucks on every other block.
Later that day I stopped by Baghdad’s world-famous Green Zone. There, the challenges of living without functioning public infrastructure are also addressed by private actors. The difference is that in the Green Zone, the solutions actually work. The enclave has its own electrical grid, its own phone and sanitation systems, its own oil supply, and its own state-of-the-ar
Everywhere in Iraq, the wildly divergent values assigned to different categories of people are on crude display. Westerners and their Iraqi colleagues have checkpoints at the entrances to their streets, blast walls in front of their houses, body armor, and private security guards on call at all hours. They travel the country in menacing armored convoys, with mercenaries pointing guns out the windows as they follow their prime directive to “protect the principal.” With every move they broadcast the same unapologetic message: We are the chosen, our lives are infinitely more precious than yours. Middle-class Iraqis, meanwhile, cling to the next rung down the ladder: they can afford to buy protection from local militias, they are able to ransom a family member held by kidnappers, they may ultimately escape to a life of poverty in Jordan. But the vast majority of Iraqis have no protection at all. They walk the streets exposed to any possible ravaging, with nothing between them and the next car bomb but a thin layer of fabric. In Iraq, the lucky get Kevlar; the rest get prayer beads.
Like most people, I saw the divide between Baghdad’s Green and Red zones as a simple by-product of the war: This is what happens when the richest country in the world sets up camp in one of the poorest. But now, after years spent visiting other disaster zones, from post-tsunami Sri Lanka to post-Katrina New Orleans, I’ve come to think of these Green Zone/Red Zone worlds as something else: fast-forward versions of what “free market” forces are doing to our societies even in the absence of war. In Iraq the phones, pipes, and roads had been destroyed by weapons and trade embargoes. In many other parts of the world, including the United States, they have been demolished by ideology, the war on “big government,” the religion of tax cuts, the fetish for privatization. When that crumbling infrastructure is blasted with increasingly intense weather, the effects can be as devastating as war.
Last February, for instance, Jakarta suffered one of these predictable disasters. The rains had come, as they always do, but this time the water didn’t drain out of Jakarta’s famously putrid sewers, and half the city filled up like a swimming pool. There were mass evacuations, and at least fifty-seven people were killed. No bombs or trade sanctions were needed for Jakarta’s infrastructure to fail—in fact, the steady erosion of the country’s public sphere had taken place under the banner of “free trade.” For decades, Washington-back
In wealthier countries, where public infrastructure was far more robust before the decline began, it has been possible to delay this kind of reckoning. Politicians have been free to cut taxes and rail against big government even as their constituents drove on, studied in, and drank from the huge public-works projects of the 1930s and 1940s. But after a few decades, that trick stops working. The American Society of Civil Engineers has warned that the United States has fallen so far behind in maintaining its public infrastructure—
After each new disaster, it’s tempting to imagine that the loss of life and productivity will finally serve as a wake-up call, provoking the political class to launch some kind of “new New Deal.” In fact, the opposite is taking place: disasters have become the preferred moments for advancing a vision of a ruthlessly divided world, one in which the very idea of a public sphere has no place at all. Call it disaster capitalism. Every time a new crisis hits—even when the crisis itself is the direct by-product of free-market ideology—the fear and disorientation that follow are harnessed for radical social and economic re-engineering.
Consider the instant reactions to last summer’s various infrastructure disasters. Four days after the Minneapolis bridge collapsed, a Wall Street Journal editorial had the solution: “tapping private investors to build and operate public roads and bridges,” with the cost made up from ever-escalating
1. If these solutions seemed to present themselves with uncanny speed, it is largely because Washington’s think tanks have been on such an aggressive campaign to privatize the essential functions of the state. As a May 2007 cover story in Business Week explained, “In the past year, banks and private investment firms have fallen in love with public infrastructure.
It’s not hard to imagine what this free market in subways would look like: high-speed lines ferrying commuters from the Upper West Side to Wall Street, while the trains serving the South Bronx wouldn’t just continue their long decay—they would simply drown.
The same week as the bridge collapse, hysteria erupted over canceled flights and delays at London’s Heathrow airport, prompting The Economist to demand “radical reform” of the “grubby, cramped” facility. London’s airports are already privatized, but now, according to the magazine, they should be deregulated, allowing terminals to compete against one another: “different firms could provide different forms of security checks, some faster and dearer than others.” Meanwhile, in New Orleans, schools were getting ready to reopen for fall. More than half the city’s students would be attending newly minted charter schools, where they would enjoy small classes, well-trained teachers, and refurbished libraries, thanks to special state and foundation funding pouring into what the New York Times has described as “the nation’s preeminent laboratory for the widespread use of charter schools.” But charters are only for the students who are admitted to the system—an educational Green Zone. The rest of New Orleans’s public-school students—many of them with special emotional and physical needs, almost all of them African American—are dumped into the pre-Katrina system: no extra money, overcrowded classrooms, more guards than teachers. An educational Red Zone.
Other institutions that had attempted to bridge the gap between New Orleans’s super-rich and ultra-poor were also under attack: thousands of units of subsidized housing were slotted for demolition, and Charity Hospital, the city’s largest public-health facility, remained shuttered. The original disaster was created and deepened by public infrastructure that was on its last legs; in the years since, the disaster itself has been used as an excuse to finish the job.
There will be more Katrinas. The bones of our states—so frail and aging—will keep getting buffeted by storms both climatic and political. And as key pieces of the infrastructure are knocked out, there is no guarantee that they will be repaired or rebuilt, at least not as they were before. More likely, they will be left to rot, with the well-off withdrawing into gated communities, their needs met by private suppliers.
Not so long ago, disasters were periods of social leveling, rare moments when atomized communities put divisions aside and pulled together. Today they are moments when we are hurled further apart, when we lurch into a radically segregated future where some of us will fall off the map and others ascend to a parallel privatized state, one equipped with well-paved highways and skyways, safe bridges, boutique charter schools, fast-lane airport terminals, and deluxe subways.
As Iraq and New Orleans both reveal, the markets opened up by crises aren’t only the roads, schools, and oil wells; the disasters themselves are major new markets. The military-indust
It happened in New Orleans. Within weeks of Hurricane Katrina, the Gulf Coast became a domestic laboratory for the same kind of government run by contractors that was pioneered in Iraq. The companies that snatched up the biggest contracts were the familiar Baghdad gang: Halliburton’s KBR unit received a $60 million contract to reconstruct military bases along the coast. Blackwater was hired to protect FEMA operations, with the company billing an average of $950 a day per guard. Parsons, infamous for its sloppy work in Iraq, was brought in for a major bridge-construc
Since then, privatized disaster response has become one of the hottest industries in the South. Just one year after Hurricane Katrina, a slew of new corporations had entered the market, promising safety and security should the next Big One hit. One of the more ambitious ventures was launched by a charter air service in West Palm Beach, Florida. Help Jet bills itself as “the world’s first hurricane escape plan that turns a hurricane evacuation into a jet-setter vacation.” When a storm is coming, the charter company books holidays for its members at five-star golf resorts, spas, or Disneyland. With the reservations made, the evacuees are then whisked out of the hurricane zone on a luxury jet. “No standing in lines, no hassle with crowds, just a first class experience that turns a problem into a vacation. . . . Enjoy the feeling of avoiding the usual hurricane evacuation nightmare.” For the people left behind, there is a different kind of privatized solution. In 2006, the Red Cross signed a new disaster-respon
Much of the parallel disaster economy has been built with taxpayers’ money, thanks to the boom in privatized war-zone reconstruction.
2. One of the most alarming aspects of this industry is how unabashedly partisan it is. Blackwater, for instance, is closely aligned with the anti-abortion movement and other right-wing causes. It donates almost exclusively to the Republican Party, rather than hedging its bets like most big corporations. Halliburton sends 93 percent of its campaign contributions to Republicans; Fluor, 78 percent. Is it far-fetched to imagine a day when political parties will hire these companies to spy on their rivals during an election campaign—or to engage in covert operations too shady even for the CIA?
Blackwater has been called “al Qaeda for the good guys” by its right-wing admirers. It’s a striking analogy. Wherever the disaster-capita
The reach of the disaster industry extends far beyond policing. When the contractor infrastructure built up during the Bush years is looked at as a whole, what we see is a fully articulated state-within-a-
The actual state, meanwhile, has lost the ability to perform its core functions without the help of contractors. Its own equipment is out of date, and the best experts have fled to the private sector. When Katrina hit, FEMA had to hire a contractor to award contracts to contractors. Similarly, when it came time to update the Army manual on the rules for dealing with contractors, the Army outsourced the job to one of its major contractors, MPRI, because it no longer had the in-house expertise. The CIA has lost so many staffers to the privatized spy sector that it has had to bar contractors from recruiting in the agency dining room. “One recently retired case officer said he had been approached twice while in line for coffee,” reported the Los Angeles Times. And when the Department of Homeland Security decided it needed to build “virtual fences” on the U.S. borders with Mexico and Canada, Michael P. Jackson, deputy secretary of the department, told contractors, “This is an unusual invitation. . . . We’re asking you to come back and tell us how to do our business.” The department’s inspector general explained that Homeland Security “does not have the capacity needed to effectively plan, oversee, and execute the [Secure Border Initiative] program.”
Under George W. Bush, the state still has all the trappings of a government—the impressive buildings, presidential press briefings, policy battles—but it no more does the actual work of governing than the employees at Nike’s Beaverton, Oregon, campus stitch running shoes.
The implications of the decision by the current crop of politicians to systematically outsource their elected responsibilitie
“Neglected Defense: Mobilizing the Private Sector to Support Homeland Security,” a 2006 report whose advisory committee included some of the largest corporations in the sector, warned that “the compassionate federal impulse to provide emergency assistance to the victims of disasters affects the market’s approach to managing its exposure to risk.” Published by the Council on Foreign Relations, the report argued that if people know the government will come to the rescue, they have no incentive to pay for protection. In a similar vein, a year after Katrina, CEOs from thirty of the largest corporations in the United States joined together under the umbrella of the Business Roundtable, which includes in its membership Fluor, Bechtel, and Chevron. The group, calling itself Partnership for Disaster Response, complained of “mission creep” by the nonprofit sector in the aftermath of disasters. The mercenary firms, meanwhile, have been loudly claiming that they are better equipped than the U.N. to engage in peacekeeping in Darfur.
Much of this new aggressiveness flows from suspicion that the golden era of bottomless federal contracts might not last much longer. The U.S. government is barreling toward an economic crisis, thanks in no small part to the deficit spending that has bankrolled the privatized disaster economy. Sooner rather than later, the contracts are likely to dip significantly. In late 2006 defense analysts began predicting that the Pentagon’s acquisitions budget could shrink by as much as 25 percent in the coming decade.
When the disaster bubble bursts, firms such as Bechtel, Fluor, and Blackwater will lose much of their primary revenue streams. They will still have all the high-tech equipment bought at taxpayer expense, but they will need to find a new business model, a new way to cover their high costs. The next phase of the disaster-capita
Wealth already provides an escape hatch from most disasters—it buys early-warning systems for tsunami-prone regions and stockpiles of Tamiflu for the next outbreak. It buys bottled water, generators, satellite phones, and rent-a-cops. During the Israeli attack on Lebanon in 2006, the U.S. government initially tried to charge American citizens for the cost of their own evacuation, though it was eventually forced to back down. If we continue in this direction, the images of people stranded on New Orleans rooftops will not only have been a glimpse of America’s unresolved past of racial inequality but will also have foreshadowed a collective future of disaster apartheid, in which survival is determined primarily by one’s ability to pay.
Perhaps part of the reason so many of our elites, both political and corporate, are so sanguine about climate change is that they are confident they will be able to buy their way out of the worst of it. This may also partially explain why so many Bush supporters are Christian end-timers. It’s not just that they need to believe there is an escape hatch from the world they are creating. It’s that the Rapture is a parable for what they are building down here on Earth—a system that invites destruction and disaster, then swoops in with private helicopters and airlifts them and their friends to divine safety.
As contractors rush to develop alternative stable sources of revenue, one avenue of business is in disaster-proofi
The contracting industry predicts that these new markets will expand dramatically over the next decade. A frank vision of where these trends are leading is provided by John Robb, a former covert-action mission commander with Delta Force turned management consultant. In a widely circulated manifesto for Fast Company magazine, he describes the “end result” of the war on terror as “a new, more resilient approach to national security, one built not around the state but around private citizens and companies. . . . Security will become a function of where you live and whom you work for, much as health care is allocated already.”
Robb writes, “Wealthy individuals and multinational corporations will be the first to bail out of our collective system, opting instead to hire private military companies, such as Blackwater and Triple Canopy, to protect their homes and facilities and establish a protective perimeter around daily life. Parallel transportation networks—evolvi
In other words, a world of suburban Green Zones. As for those outside the secured perimeter, “they will have to make do with the remains of the national system. They will gravitate to America’s cities, where they will be subject to ubiquitous surveillance and marginal or nonexistent services. For the poor, there will be no other refuge.” The future Robb describes sounds very much like the present in New Orleans, where two very different kinds of gated communities emerged from the rubble. On the one hand were the so-called FEMA-villes: desolate, out-of-the-way trailer camps for low-income evacuees, built by Bechtel or Fluor subcontractors and administered by private security companies that patrolled the gravel lots, restricted visitors, kept journalists out, and treated survivors like criminals. On the other hand were the gated communities built in the wealthy areas of the city like Audubon and the Garden District, bubbles of functionality that seemed to have seceded from the state altogether. Within weeks of the storm, residents there had water and powerful emergency generators. Their sick were treated in private hospitals, and their children went to private or charter schools. And they had no need for public transit. In St. Bernard Parish, a New Orleans suburb, DynCorp had taken over much of the policing; other neighborhoods hired security companies directly. Between the two kinds of privatized city-states was the New Orleans version of the Red Zone, where the murder rate soared and neighborhoods like the storied Lower Ninth Ward descended into a postapocalyptic
Another glimpse of a disaster-aparth
A few months later, Sandy Springs became the first “contract city.” Only four people worked directly for the new municipality—ev
In these wealthy Atlanta suburbs, the long crusade to strip-mine the state is nearing completion, and it is particularly fitting that the new ground was broken by CH2M Hill. The corporation was a multimillion-do
For decades, the conventional wisdom was that generalized mayhem was a drain on the global economy. Individual shocks and crises could be harnessed as leverage to force open new markets, of course, but after the initial shock had done its work, relative peace and stability were required for sustained economic growth. That was the accepted explanation for why the Nineties had been such prosperous years: with the Cold War over, economies were liberated to concentrate on trade and investment, and as countries became more enmeshed and interdependent,
At the 2007 World Economic Forum in Davos, Switzerland, however, political and corporate leaders were scratching their heads over a state of affairs that seemed to flout this conventional wisdom. It was being called the “Davos Dilemma,” which Financial Times columnist Martin Wolf described as “the contrast between the world’s favourable economics and troublesome politics.” As Wolf put it, the economy had faced “a series of shocks: the stock market crash after 2000; the terrorist outrages of September 11, 2001; wars in Afghanistan and Iraq; friction over US policies; a jump in real oil prices to levels not seen since the 1970s; the cessation of negotiations in the Doha round [of WTO talks]; and the confrontation over Iran’s nuclear ambitions”—and yet it found itself in “a golden period of broadly shared growth.” Put bluntly, the world was going to hell, there was no stability in sight, and the global economy was roaring its approval.
This puzzling trend has also been observed through an economic indicator called “the guns-to-caviar index.” The index tracks the sales of fighter jets (guns) and executive jets (caviar). For seventeen years, it generally found that when fighter jets were selling briskly, sales of luxury executive jets went down, and vice versa: when executive-jet sales were on the rise, fighter-jet sales dipped. Of course, a handful of war profiteers always managed to get rich from selling guns, but they were economically insignificant. It was a truism of the contemporary market that you couldn’t have booming economic growth in the midst of violence and instability.
Except that the truism is no longer true. Since 2003, the year of the Iraq invasion, the index has found that spending has been going up on both fighter jets and executive jets rapidly and simultaneously,
The scale of the revenues at stake is certainly enough to fuel an economic boom. Lockheed Martin, whose former vice president chaired the Committee for the Liberation of Iraq, which loudly agitated for the invasion, received $25 billion in U.S. government contracts in 2005 alone. Democratic Congressman Henry Waxman noted that the sum “exceeded the gross domestic product of 103 countries, including Iceland, Jordan, and Costa Rica . . . [and] was also larger than the combined budgets of the Department of Commerce, the Department of the Interior, the Small Business Administration,
The Davos Dilemma is being fueled further by the intensely profitable model of privatized reconstruction that was forged in Iraq. Share prices of heavy-construct
Terrorist attacks, which used to send the stock market spiraling downward, now receive a similarly upbeat market reception. After September 11, 2001, the Dow Jones plummeted 685 points as soon as markets reopened. In sharp contrast, on July 7, 2005, the day four bombs ripped through London’s public transportation system, killing dozens and injuring hundreds, the U.S. stock market closed higher than it had the day before, with the Nasdaq up 7 points. A year later, on the day British law-enforcement
Then there are the outrageous fortunes of the oil sector—a $40 billion profit in 2006 for ExxonMobil alone, the largest profit ever recorded, and its colleagues at rival companies like Chevron were not far behind. Like the fortunes of corporations linked to defense, heavy construction, and homeland security, those of the oil sector improve with every war, terrorist attack, and Category 5 hurricane. In addition to reaping the short-term benefits of high prices linked to uncertainty in key oil-producing regions, the oil industry has consistently managed to turn disasters to its long-term advantage, whether by ensuring that a large portion of the reconstruction funds in Afghanistan went into the expensive road infrastructure for a new pipeline (while most other major reconstruction projects stalled), or by pushing for a new investor-friend
The recent spate of disasters has translated into such spectacular profits that many people around the world have come to the same conclusion: the rich and powerful must be deliberately causing the catastrophes so that they can exploit them. In July 2006, a national poll of U.S. residents found that more than a third of respondents believed that the government had a hand in the 9/11 attacks or took no action to stop them “because they wanted the United States to go to war in the Middle East.” Similar suspicions dog most of the catastrophes of recent years. In Louisiana in the aftermath of Katrina, the shelters were alive with rumors that the levees hadn’t broken but had been covertly blown up in order to keep the rich areas dry while cleansing the city of poor people. In Sri Lanka, I often heard that the tsunami had been caused by underwater explosions detonated by the United States so that it could send troops into Southeast Asia and take full control over the region’s economies.
The truth is at once less sinister and more dangerous. An economic system that requires constant growth while bucking almost all serious attempts at environmental regulation generates a steady stream of disasters all on its own, whether military, ecological, or financial. The appetite for easy, short-term profits offered by purely speculative investment has turned the stock, currency, and real estate markets into crisis-creation
Given the boiling temperatures, both climatic and political, future disasters need not be cooked up in dark conspiracies. All indications are that if we simply stay the current course, they will keep coming with ever more ferocious intensity. Disaster generation can therefore be left to the market’s invisible hand. This is one area in which it actually delivers.
The creeping expansion of the disaster-capita
There is only one cloud that looms over the thriving disaster economy—from weapons to oil to engineering to surveillance to patented drugs. It is the threatening if unlikely scenario that this latest boom could somehow be interrupted by an outbreak of climatic stability and geopolitical peace.
Naomi Klein’s most recent article for Harper’s Magazine, “Baghdad Year Zero,” appeared in the September 2004 issue. Her new book, The Shock Doctrine, from which this essay was adapted, will be published by Metropolitan Books.